Chinas-steel-industry-and-its-impact-on-the-united

CRSReportforCongressPreparedforMembersandCommitteesofCongressChina’sSteelIndustryandItsImpactontheUnitedStates:IssuesforCongressRachelTangAnalystinIndustrialOrganizationandBusinessSeptember21,2010CongressionalResearchService7-5700’sSteelIndustryandItsImpactontheUnitedStates:IssuesforCongressCongressionalResearchServiceSummaryChina’ssteelindustryhasgrownsignificantlysincethemid-1990s.Chinaisnowtheworld’slargeststeelmakerandsteelconsumer.In2009,Chinaproducedover567milliontonsofcrudesteel,nearlyhalfoftheworld’ssteel.Thatwas10timestheU.S.production.ThemajorityofChinesesteelhasbeenusedtomeetdomesticdemandinChina.However,asitssteelproductioncontinuestogrow,overcapacityisbecomingamajorconcerntoChineseindustrialpolicymakers,aswellassteelmakersoutsideChina.AlthoughindustrystatisticsindicatethattheChinesesteelindustryisnotexport-oriented,itsconsistentlyhighoutputkeepsU.S.steelmakersconcernedthatexcessChinesesteelmightoverwhelmtheglobalmarketoncedomesticdemandisadequatelymet.TheseconcernsbecomeincreasinglyacuteastheUnitedStatesandtherestoftheworldareinthemiddleofaslowrecoveryfromtheeconomicrecessionstartedinDecember2007.TheChinesesteelindustryishighlyfragmented,withmorethan1,000steelproducers,whichmakesthedomesticmarkethighlycompetitiveanddifficulttocontrol.Itsgrowthalsofacesconstraintssuchasdependenceonimportedironoreandhighenergyconsumption.TheChinesegovernmenthasshowninterestinsteppingupitseffortstoreininsteelovercapacityandtoconsolidateandrestructurethesteelindustry.However,itremainstobeseenifthegovernment’seffortsandmeasuresaretoproducesufficientormeaningfulresults.ThepossibilityofsurplussteelfromChinesesteelproducers;theirallegedquestionable,ifnotillegal,tradepractices;andthepossibilityofChinesedirectinvestmentintheU.S.steelsectorareallofmajorconcerntothesteelmakersintheUnitedStates.SteelmakersintheUnitedStatesbelievethatChina’sgovernmentsubsidizationofitssteel(intheformofanundervaluedcurrency,exportrebatesand/orquotas,subsidizedfinancing,relativelyweakenvironmental,labor,andsafetyregulations,etc.)isoneofthekeyissuesaffectingthehealthoftheU.S.steelsector.Therehavebeenmultipleanti-dumpingandcountervailingcasesintheUnitedStatesagainstcertainChinesesteelproducts,whichsuggeststhatU.S.steelproducersandtradeofficialsareincreasinglyusingtraderemediestoenforceinternationaltradelaws.TheriseofChina’ssteelsector,alongwithothermanufacturingindustries,presentsissuesbeyondtradelawenforcement.China’squestforindustrialrawmaterialsishavingconsiderableeffectonglobaldemandandsupply,andasaresult,thepricesandavailabilityofsuchinputs.China’srestrictionsonexportsofsomerawmaterials,allegedly,lowerthecostofsuchrawmaterialsinthehomeeconomy,whileincreasingglobalpricesoftheseproducts(ordiminishingglobalsupply),therebyproducinganunfairadvantageinsomemanufacturingindustries.AmidtherisingtradecasesagainstvariousChinesesteelimports,CongressbecameincreasinglyconcernedoverallegedunfairtradecompetitionfromChina.InAugust2010,legislativemeasureswereintroducedintheSenate(S.3725),whileasetofmeasuresfocusingonillegalimportpracticeswereproposedbytheU.S.CommerceDepartment,bothaimingtocontinuetherigorousandmoreeffectiveenforcementofU.S.tradelaws.ThisreportprovidesanoverviewofChina’ssteelindustryanddiscussestheissuesandimplicationswithregardtotheU.S.steelsector.China’sSteelIndustryandItsImpactontheUnitedStates:IssuesforCongressCongressionalResearchServiceContentsIntroduction................................................................................................................................1OverviewofChina’sSteelIndustry.............................................................................................2ChinaBecomesTopSteelProducerandConsumer................................................................4SteelConsumptionandCapacity...........................................................................................6China’sSteelIndustryStructureandComposition.................................................................7SupplyofKeySteel-MakingRawMaterials..........................................................................8Coal................................................................................................................................8ChinaandtheGlobalIronOreMarket.............................................................................9TheRioTintoCase.......................................................................................................10IronOreTradeMovestoQuarterlyPrices.....................................................................11China’sQuestforIronOre,AmongOtherNaturalResources........................................12RareEarthMetals.........................................................................................................13China’sSteelIndustryPoliciesandMeasures............................................................................14TheSteelIndustryRevitalizationPlan.................................................................